Houses in Canada 2 to 3 times as expensive as U.S.

[Charles Mackay]

Whoops... our friends up North are in for a shock.

http://americacanada.blogspot.com/20...deflation.html

[Spartacus]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Scary, scary stuff.

And he's not even as much of a doomer as me.

That $559,000 house looks to me like an East York place - no other Toronto suburb has lots of one-storey houses. Built around about WWII, single storey with a basement. Detached garage or no garage - The driveway comes up to the house's side door.

Another interesting comparison is "housing" in India. From my recollections of North India, the fraction of personal income going to housing in India, even in small semi-rural towns is even worse than in Canada.

I agree that the easy credit is the main culprit here for the difference in prices - I'd say 80%[1]

and at the same time IMHO the blog's writer doesn't give enough weight to the pro-ownership, anti-renting ethos that's strong in the US, stronger (AFAICT) in Canada and much stronger in India.

I'd love to hear other people's guesses about cultures they're familiar with - which cultures place great importance on ownership vs renting?

Someone else will have to chime in about this ethos in Europe, Africa, Australia, South America & China/Japan/Korea

Whoops... our friends up North are in for a shock.

http://americacanada.blogspot.com/20...deflation.html

[1] statistics say that there's a 99% chance I completely pulled the number out of the air with zero supporting evidence or reasoning

[hayekvindicated]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Scary, scary stuff.

And he's not even as much of a doomer as me.

That $559,000 house looks to me like an East York place - no other Toronto suburb has lots of one-storey houses. Built around about WWII, single storey with a basement. Detached garage or no garage - The driveway comes up to the house's side door.

Another interesting comparison is "housing" in India. From my recollections of North India, the fraction of personal income going to housing in India, even in small semi-rural towns is even worse than in Canada.

Housing in India serves as a vehicle for the class that doesn't pay tax ("Black Money") to hoard its wealth. Ergo, due to massive income inequalities and rampant corruption/tax evasion, housing in India will always be much more expensive relative to income than in the West.

Bombay (Mumbai) is a good example of that. Prices there have been out of the reach of the vast majority of people for generations. And yet, despite massive corrections at various times, they continue to be at levels that even middle class people cannot afford (let alone the poor).

When I wanted to buy land in India, I was told that some 85 percent of the price had to be paid in hard cash (Black Money). This sum would not show up on any property deed and would not be the amount at which the transaction would be registered with the land registry for stamp duty purposes. I refused to do it. I managed to find a seller who agreed to accept the entire amount by bank draft. However, that was a rare exception.

[lsa420]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Whoops... our friends up North are in for a shock.

http://americacanada.blogspot.com/20...deflation.html

Thanks for posting the blog article. I was in Vancouver visiting family in September and was *shocked* at the price of housing up there. As the article points out, prices are sky high and incomes are not nearly high enough to cover debt service.

My cousins live in Burnaby, just 15 minutes east of downtown Vancouver. In addition to my cousin, his wife and two daughters, they have 4 other roommates to cover rent. I would guess the house is valued at close to $1,000,000 CAD although they are renters and do not own the home. I'm not sure if the roommate situation is the norm, but that seems about the only way to afford housing if you are a normal person.

In any case, I definitely came away with the impression that there is a massive real estate bubble in greater Vancouver.

Any ideas on how to short this thing?:p

[hayekvindicated]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Thanks for posting the blog article. I was in Vancouver visiting family in September and was *shocked* at the price of housing up there. As the article points out, prices are sky high and incomes are not nearly high enough to cover debt service.

My cousins live in Burnaby, just 15 minutes east of downtown Vancouver. In addition to my cousin, his wife and two daughters, they have 4 other roommates to cover rent. I would guess the house is valued at close to $1,000,000 CAD although they are renters and do not own the home. I'm not sure if the roommate situation is the norm, but that seems about the only way to afford housing if you are a normal person.

In any case, I definitely came away with the impression that there is a massive real estate bubble in greater Vancouver.

Any ideas on how to short this thing?:p

Short Canadian home builders?

[LargoWinch]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Whoops... our friends up North are in for a shock.

http://americacanada.blogspot.com/20...deflation.html

Thanks for the post Charles.

When I retire, I am buying a place in the warm Southern US, but only if cjppjc act as my representative on the deal. ;)

Oh and I might even get to meet Raz while I am at it!

[lsa420]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Short Canadian home builders?

I would say that is definitely something to look into. Do you know of any off the top of your head listed on TSX?

[hayekvindicated]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

I would say that is definitely something to look into. Do you know of any off the top of your head listed on TSX?

Dunno - never been to Canada. Largo, any thoughts on this?

[Adeptus]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Here's the top 11 (off the top of my head) reasons that have prevented a significant real estate crash in Canada so far, I've probably left out a whole bunch too:

1. No *official* sub-prime/ARM/NINJA type loans, though for about 1.5 years we had 0% down/ 40 year mortgages. Now minimum is 5% down, 35 Yr mortgages, which is still allowing for people to get into mortgage debt equal to 7x their gross annual income (twice the norm from only ~7 years ago).
2. No significant credit crunch. Banks are still lending ridiculous ammounts of money and many pushing mortgages to make up for loss revenue due to economic crisis.
3.Financial institutions are still not liable for most of mortgage risk. 90% of mortgages are sold off-book into securities: MBS (Mortgage Backed Securities)
4. Government is still buying TONNES of MBS as part of the 'economic recovery'
5. Most people who don't have 20% downpayments pay a 3% mortgage insurance premium (auto-packaged into their mortgage) to the "CMHC" (equivalent to Freddie/Fannie). This institution continues to have it's insurable limits raised by the government by HUNDREDS of billions. When the housing finally crashes, CMHC will eventually break, and due to Quasi-government entity, I expect nothing more than a tax-payer bail-out, just like in the USA.
6. Government has provided home-buying incentives to stimulate the economy such as Renovation tax credits (rough numberS: Aprox $1.5K back if you spend $10K).
7. All time artificial low interest rates that won't go away any time soon (Maybe late Q3 2010)
8. Realtors pumping realestate like Q4 2008 never happened. "It's always a great time to buy!!!"
9. Mass ignorance of the population when it comes to financial matters despite nightly TV reminders about the world wide recession & what's going on in the USA (even if it is portrayed through rose colored glasses looking at nothing but 'green shoots')
10. Canadian TV MSM lacks unbiased real estate market reporting. Most of the reports are provided by the Realtor Association or realtors coming on TV spitting out the usual cliches.
11. Likewise, newspapares lack unbiased real estate reporting because guess whom their top advertizers are? Yep, Realtors & their organizations.

EDIT: Wanted to add one more note...
http://www.ctv.ca/servlet/ArticleNew...029?hub=Canada

Looks like our Government, or specifically the BoC (Bank of Canada - US fed equivalent), is starting to come to its senses, and instead of assisting the prorogation of ever higher real estate values through intervention or lack-there-of, it *may* soon do "something". One thing I've learned from reading iTulip is, if the government states it will go in direction X, don't bet against the government by going in direction Y.

Only a question of time now, before real estate value implosion occurs... because this INSANITY can't go on forever... TICK TOCK TICK TOCK





Adeptus

[Spartacus]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

I didn't know it was that high

A North American relative visited India wanted to buy 2 hotels in Delhi, to be an absent owner - a cousin would run the places.

At one point he said "you have to be really careful about all your dealings there - everyone's a shark looking for prey. One mis-step and you're toast (or roti, in this case)". I pointed out that even in Europe, the US and Canada, the independent property management firms that take a cut of the rent to "take care of the owner's headaches" are rife with corruption ... being an "absentee owner" of property in India might be a great way to expose oneself to all kinds of mischief.

Didn't hear much about that again ...

When I wanted to buy land in India, I was told that some 85 percent of the price had to be paid in hard cash (Black Money). This sum would not show up on any property deed and would not be the amount at which the transaction would be registered with the land registry for stamp duty purposes. I refused to do it. I managed to find a seller who agreed to accept the entire amount by bank draft. However, that was a rare exception.

[hayekvindicated]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

I didn't know it was that high

A North American relative visited India wanted to buy 2 hotels in Delhi, to be an absent owner - a cousin would run the places.

At one point he said "you have to be really careful about all your dealings there - everyone's a shark looking for prey. One mis-step and you're toast (or roti, in this case)". I pointed out that even in Europe, the US and Canada, the independent property management firms that take a cut of the rent to "take care of the owner's headaches" are rife with corruption ... being an "absentee owner" of property in India might be a great way to expose oneself to all kinds of mischief.

Didn't hear much about that again ...

Fraud is rampant in the real estate market in India. Its worse in north India than in other places. Delhi is the world capital of hucksters and conmen. I've never lived in any city in which one had to be so suspicious of everything. Horrible place - rampant corruption, pollution, lawlessness, fraudsters all over the place and the most obnoxious nouveau riche I ever met in my life.

But truth be told, you can NEVER buy property in India and let anyone outside of your immediate family manage it. Its not that there is a "chance" you will be toast, it is a certainty!

[lsa420]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Here's the top 11 (off the top of my head) reasons that have prevented a significant real estate crash in Canada so far, I've probably left out a whole bunch too:

1. No *official* sub-prime/ARM/NINJA type loans, though for about 1.5 years we had 0% down/ 40 year mortgages. Now minimum is 5% down, 35 Yr mortgages, which is still allowing for people to get into mortgage debt equal to 7x their gross annual income (twice the norm from only ~7 years ago).
2. No significant credit crunch. Banks are still lending ridiculous ammounts of money and many pushing mortgages to make up for loss revenue due to economic crisis.
3.Financial institutions are still not liable for most of mortgage risk. 90% of mortgages are sold off-book into securities: MBS (Mortgage Backed Securities)
4. Government is still buying TONNES of MBS as part of the 'economic recovery'
5. Most people who don't have 20% downpayments pay a 3% mortgage insurance premium (auto-packaged into their mortgage) to the "CMHC" (equivalent to Freddie/Fannie). This institution continues to have it's insurable limits raised by the government by HUNDREDS of billions. When the housing finally crashes, CMHC will eventually break, and due to Quasi-government entity, I expect nothing more than a tax-payer bail-out, just like in the USA.
6. Government has provided home-buying incentives to stimulate the economy such as Renovation tax credits (rough numberS: Aprox $1.5K back if you spend $10K).
7. All time artificial low interest rates that won't go away any time soon (Maybe late Q3 2010)
8. Realtors pumping realestate like Q4 2008 never happened. "It's always a great time to buy!!!"
9. Mass ignorance of the population when it comes to financial matters despite nightly TV reminders about the world wide recession & what's going on in the USA (even if it is portrayed through rose colored glasses looking at nothing but 'green shoots')
10. Canadian TV MSM lacks unbiased real estate market reporting. Most of the reports are provided by the Realtor Association or realtors coming on TV spitting out the usual cliches.
11. Likewise, newspapares lack unbiased real estate reporting because guess whom their top advertizers are? Yep, Realtors & their organizations.

EDIT: Wanted to add one more note...
http://www.ctv.ca/servlet/ArticleNew...029?hub=Canada

Looks like our Government, or specifically the BoC (Bank of Canada - US fed equivalent), is starting to come to its senses, and instead of assisting the prorogation of ever higher real estate values through intervention or lack-there-of, it *may* soon do "something". One thing I've learned from reading iTulip is, if the government states it will go in direction X, don't bet against the government by going in direction Y.

Only a question of time now, before real estate value implosion occurs... because this INSANITY can't go on forever... TICK TOCK TICK TOCK





Adeptus

This doesn't look familiar at all.

[Starving Steve]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Whoops... our friends up North are in for a shock.

http://americacanada.blogspot.com/20...deflation.html

I hope readers took note of that 1500 square foot old shack on the 30 front-foot lot in Vancouver: $989,000.

This is what happens when you let environmentalists take-over city planning departments: land prices drive house prices to the moon. So, in the name of preserving habitat for salmon, or in the name of preventing so-called "urban sprawl", or in the name of preserving "the endangered San Francisco County field mouse", or in the name of "creating a low- carbon emission and climate-friendly environment", this is exactly what happens to home prices.

Renters and new-comers to the city get the shaft. People are left homeless, double-up, then triple-up on apartments, and then the people begin to sleep in the streets. Then the drug gangs come in, and then the tagging begins. Then come the drive-by shootings. Later, come the mysterious fires and arson in the night. After years of this, the industries and people move-OUT, and the entire urban landscape begins to die.

But don't tell any of this to the city planners now. Urban elitism and salmon habitat preservation is their agenda.

Just keep looking at that $989,000 wonder house above.... :rolleyes:

[LargoWinch]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

Dunno - never been to Canada. Largo, any thoughts on this?

Canada's economy, unlike our cousins south of the border, is to small for publicly-traded homebuilders.

The only Canadian-based construction company I know of which is traded on the TSX is Aecon, but they are a road/commercial/industrial builder.

PCL, based in Edmonton, is the largest builder (again road/commercial/industrial) by far, but is private. The same with EllisDon.

[Fiat Currency]

Re: Houses in Canada 2 to 3 times as expensive as U.S.

I'm not an expert in Real Estate.

However, I would challenge the $600K average house price in Toronto. I would have guessed closer to $380K ... and Adeptus provided a chart that shows it just under $400K. It makes some of the data seem questionable.

Vancouver is a different animal - and has been for many years. Much Asian "family money" lands in Vancouver, and drives up house prices. It's also locked by mountains, and the ocean - which makes growing out hard. Add-in a lot of speculation due to 2010 Winter Olympics - and things got worse.

Calgary is somewhat overpriced - but there are jobs in the Oil Sands companies (yes still) and the market is currently bearing those prices (for now).

I'm not denying that Canadian Real Estate will see some bubblicious corrections - just pointing out that the data can't be completely correct - and other factors will come into play.